He'll refute that by outlining his unusual hodgepodge of stocks, which hardly resembles the typical by-the-books, low price-earnings-driven portfolio of a big-cap value player. Margolies counts cigarettes, Spam and telephone headsets among the products of companies in which the fund recently has invested.

Okay, tobacco stocks are a value fund staple, so Margolies is no rebel here. Salomon Capital's two largest holdings are in tobacco companies,
RJR Nabisco Holdings
and
Philip Morris
, which constitute 5.3% and 4.6% of the fund, respectively.

Margolies, a 40-year-old former high-yield bond analyst, buys stocks he sees as cheap and capable of price appreciation when spurred by a catalyst. He expects that catalyst to be either a major legal victory for tobacco companies or a far-reaching settlement of widespread litigation against them. He's not claiming to know which is going to happen, but thinks the long-running battle will be resolved in the next 12-18 months.

"Once they've agreed on a deal, they're going to try to do what's best for their shareholders and employees," Margolies says.

He expects RJR to "dividend-out" its profitable Nabisco operation -- basically spin off its 80% ownership in the cookie and cracker maker in the form of a dividend -- while keeping the tobacco assets.

Don't let its big tobacco stake fool you;. Salomon Capital's signature is variety. It doesn't make large bets on any given sector. Margolies does, however, make pretty hefty individual stock bets. You'll find almost no stocks that constitute less than 1% of assets, and the top 10 holdings typically comprise 30%-40% of the portfolio.

Helping to diversify the fund is the ability to buy companies of any size. Salomon Capital is 36% invested in large-capitalization stocks, that is, in companies with a market cap above $5 billion; 32% invested in mid-cap companies, and 32% invested in small-cap companies, which have market capitalizations under $1 billion.

The broker-sold fund levies a hefty 5.75% upfront sales load on its Class A shares. Most of its assets are in Class O shares; that class now is closed and was available only to Salomon Smith Barney employees anyway. In 1996, various classes of public shares were added, with the usual pay-me-now or pay-me-later permutations.

Class O has returned an annualized 21.18% over the past three years, ranking it in the top 5% of its capital-appreciation peers, according to Lipper Analytical Services. It's also in the upper 30% in 12-month and year-to-date performance.

Despite being classified by Morningstar as a large-cap value fund, Salomon Brothers Capital owns a fair amount of growth stocks, and many that combine both attributes. A classic case: telephone headset-maker
Plantronics
.

He recently bought shares of the Santa Cruz, California-based company at 46, down from its high of 65 1/2 . It's trading at a fairly modest multiple of about 15 times next year's anticipated earnings, and Margolies projects 20% growth or more. "So, I ask you, is that growth or value?" he says.

Plantronics is a good way to play the growth of the service economy. Headsets are rapidly replacing telephone handsets in many offices. Plantronics is also a player in the airline headset business.

Margolies calls Plantronics his "low-tech, high-tech" holding because, while headsets aren't microprocessors, Plantronics isn't stingy on research and development, spending about 8% of its sales on R&D.

Margolies' real tech pet is
Seagate Technology
, which he bought last week at 18. He says the disc-drive maker's cash and software business is worth $10-$12 a share alone. It's his second-biggest tech holding, at 2.7% of assets.

If tobacco is too touchy and Seagate too techy, consider Spam. Yes, the pseudo-ham in the blue can with yellow lettering.
Hormel Foods
, the maker of Spam, is what Margolies calls one of his "anchor" holdings. It gives him the conservative grounding to go after some of his riskier bets.

Hormel, the No.1 U.S. producer of processed meats, is in Salomon Brothers Capital's top 10 holdings at 4% of assets. Hormel's biggest raw material, not surprisingly, is hogs. To take the volatility out of hog prices, Hormel and hog farmers have arranged for a price stabilizing system, which now has Hormel subsidizing the farmers in a weak hog market.

Margolies points out that it takes only six months for a newborn hog to grow to its full 250 pounds, and he expects the market to stabilize in 1999, which actually would give the Austin, Minnesota, company a boost. Hormel is trading at about 15 times next year's expected earnings and should be able to expand, even in turbulent market conditions, Margolies says.

With his fund loaded with small- and mid-cap issues, Margolies is counting the days until the smaller companies start to outperform. Don't ask him when or how, though, because he's been expecting it for more than a year. While he lacks clairvoyance, he doesn't lack patience.

"I have a lot of stocks in the small-cap area that do nothing for six months or nine months and they get an entire year's return in a two- or three-month period," he said. "We're better at picking stocks than timing the market."

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